Excellent answer, Jimmy.
Now for more specifics. I learned this when in Bible School using the book of James. Here is how we did it. Get a paper and pencil - you cannot do it without it.
Always before you start, you Pray asking God to teach you.
We read the book through two times, each time in one setting.
Then divide the chapters into sections, defined by the topic each is discussing. EDIT: give it a title.
Look for a key verse in each section that seems to sum up the message there. Memorize it.
Note the definitive words - the nouns, the verbs, the adjectives, the adverbs - in each section. Write them down.
What does this section say about this word? Write it down.
Notice the word pictures.
Now put this all together - what do you see?
Accoding to what you are seeing, what does it mean? Now you interpret.
After this, how does this speak to me in how I should live?
Do this to the entire book. Note the similarities between the sections -there may be some overlap.
Then we outlined each section. When I work through a book, I may outline it. The important lesson learned in this exercise is to teach you to think: how does this all fit together?
Then we drew a "picture" of the book. (I do not do this anymore since I do not consider myself an artist.)
After we did all this, our exam consisted of writing down what the book said, starting with verse one, chapter one. All at the given signal started writing and at the end of 45 minutes, no one was done, but we all got an A+ because we learned it so well.
Now in the midst of all this I always keep in my mind this question formost: what does this tell me about God? Without this burning question motivating you, you will get nowhere, IMHO.
I have the "The International Inductive Study Bible". It is a huge book giving instructions in this method as well. The print is large with wide margins where you can write down your outlines, or any other insights.
Some books are easier to outline then others. The book of Isaiah is easy to do.
Now to expand this method to the entire Bible, doing it topically, you take one word and using Strongs Concordance, read what the Bible says about this subject, looking up each reference where it is used. Write down your observations. Go right on through to Revelation. Note the context in which this word is used - this is very important.
Brother, this method is one fascinating way to study the Scriptures. If you learn it well, you will not need any commentaries, except to inform you of some geography facts or other historical incidents not recorded in the Bible. Too many people get hung up on what this or that commentator says and ignore the clear teachings of the Word. One thing you will notice is that God says what he means, means what he says and uses the least number of words possible to communicate this message, unlike humans. :-o Something we would do well to emulate.
Hope this helps.